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Date Submitted: 06/20/2010 12:40 PM
Global financing and Exchange Rate Mechanisms
Jackleen Gerber
University of Phoenix
MGMT/ 448: Global Business Strategies
ON09BSM06
Dr. Lena Lee-Watson, RN, MBA/HCM
August 25, 2009
Global financing and Exchange Rate Mechanisms
International trade markets increase the profits of organizations. However, exporting remains a difficult task for many organizations. Many small organizations find the route daunting. Some organizations use countertrading as a means of a payment method. When countertrade is involved how is the financing operations handled associated with the risks involved, a look at these issues with additional insights will be objectively considered.
International Trade Markets
International trade occurs when an organization exports goods or services to consumers in another country. Foreign direct investment is when an organization invests resources in business activities in foreign nations outside its home country (Hill, C. 2008). Economic growth increases and jobs are created when countries engage in international trade.
Countertrade
An organization that wants to export services or products has to look at the international opportunities at hand. Many unexpected problems arise from international trade markets. Organizations must be aware of import and export financing, how to attain such financing and the foreign exchange rate risks that are involved. When the foreign currencies are not easily changeable another solution must be considered. Countertrade comes into play by which payments for exports are received in goods and services instead of actual money. When the traditional method of payment is not easy, costly or absent countertrade is an additional means.
A few examples of countertrade are:
• Saudi Arabia agreed to buy 10 747 jets from Boeing with payment in crude oil, discounted at 10 % below posted world oil prices. (Hill, C. 2008).
• General Electric won a contract for $150...